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Fixed Income Analysis von Pinto, Jerald E. (eBook)

  • Erscheinungsdatum: 06.02.2015
  • Verlag: Wiley
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Fixed Income Analysis

The essential guide to fixed income portfolio management, fromthe experts at CFA Fixed Income Analysis provides authoritative andup-to-date coverage of how investment professionals analyze andmanage fixed income portfolios. With detailed information from CFAInstitute, this guide contains comprehensive, example-drivenpresentations of all essential topics in the field to provide valuefor self-study, general reference, and classroom use. Readers arefirst introduced to the fundamental concepts of fixed income beforecontinuing on to analysis of risk, asset-backed securities, termstructure analysis, and a general framework for valuation thatassumes no prior relevant background. The final section of the bookconsists of three readings that build the knowledge and skillsneeded to effectively manage fixed income portfolios, givingreaders a real-world understanding of how the concepts discussedare practically applied in client-based scenarios. Part of the CFA Institute Investment series, this book providesa thorough exploration of fixed income analysis, clearly presentedby experts in the field. Readers gain critical knowledge ofunderlying concepts, and gain the skills they need to translatetheory into practice. Understand fixed income securities, markets, and valuation Master risk analysis and general valuation of fixed incomesecurities Learn how fixed income securities are backed by pools ofassets Explore the relationships between bond yields of differentmaturities
Investment analysts, portfolio managers, individual andinstitutional investors and their advisors, and anyone with aninterest in fixed income markets will appreciate this access to thebest in professional quality information. For a deeperunderstanding of fixed income portfolio management practices, Fixed Income Analysis is a complete, essential resource.

Produktinformationen

    Format: ePUB
    Kopierschutz: AdobeDRM
    Seitenzahl: 640
    Erscheinungsdatum: 06.02.2015
    Sprache: Englisch
    ISBN: 9781119029762
    Verlag: Wiley
    Größe: 11919 kBytes
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Fixed Income Analysis

CHAPTER 1
FIXED-INCOME SECURITIES: DEFINING ELEMENTS

Moorad Choudhry, PhD

Stephen E. Wilcox, PhD, CFA
Learning Outcomes

After completing this chapter, you will be able to do the following:

describe the basic features of a fixed-income security;
describe functions of a bond indenture;
compare affirmative and negative covenants and identify examples of each;
describe how legal, regulatory, and tax considerations affect the issuance and trading of fixed-income securities;
describe how cash flows of fixed-income securities are structured;
describe contingency provisions affecting the timing and/or nature of cash flows of fixed-income securities and identify whether such provisions benefit the borrower or the lender. 1. Introduction

Judged by total market value, fixed-income securities constitute the most prevalent means of raising capital globally. A fixed-income security is an instrument that allows governments, companies, and other types of issuers to borrow money from investors. Any borrowing of money is debt. The promised payments on fixed-income securities are, in general, contractual (legal) obligations of the issuer to the investor. For companies, fixed-income securities contrast to common shares in not having ownership rights. Payment of interest and repayment of principal (amount borrowed) are a prior claim on the company's earnings and assets compared with the claim of common shareholders. Thus, a company's fixed-income securities have, in theory, lower risk than that company's common shares.

In portfolio management, fixed-income securities fulfill several important roles. They are a prime means by which investors-individual and institutional-can prepare to fund, with some degree of safety, known future obligations such as tuition payments or pension obligations. The correlations of fixed-income securities with common shares vary, but adding fixed-income securities to portfolios including common shares is usually an effective way of obtaining diversification benefits.

Among the questions this chapter addresses are the following:

What set of features define a fixed-income security, and how do these features determine the scheduled cash flows?
What are the legal, regulatory, and tax considerations associated with a fixed-income security, and why are these considerations important for investors?
What are the common structures regarding the payment of interest and repayment of principal?
What types of provisions may affect the disposal or redemption of fixed-income securities?
Embarking on the study of fixed-income securities, please note that the terms "fixed-income securities,""debt securities," and "bonds" are often used interchangeably by experts and non-experts alike. We will also follow this convention, and where any nuance of meaning is intended, it will be made clear. 1

The remainder of this chapter is organized as follows. Section 2 describes, in broad terms, what an investor needs to know when investing in fixed-income securities. Section 3 covers both the nature of the contract between the issuer and the bondholders as well as the legal, regulatory, and tax framework within which this contract exists. Section 4 presents the principal and interest payment structures that characterize fixed-income securities. Section 5 discusses the contingency provisions that affect the timing and/or nature of a bond's cash flows. The final section provides a conclusion and summary of the chapter.
2. Overview of a Fixed-Income Security

There are three important elements that an investor needs to know about when investing in a fixed-income security:

The bond's features, including the issuer, maturity, par value, coupon rate and frequency, and currency

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